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07 September 2017

A recent English High Court decision, S Franses Ltd v The Cavendish Hotel, examined a landlord’s intention to carry out substantial construction work to a premises and its ability to oppose its tenant’s lease renewal.

The law

A landlord in England may oppose a lease renewal by demonstrating that it intends to carry out substantial construction work to the premises and that it could not reasonably do so without obtaining vacant possession. This is known as "Ground F". There is a similar provision in the Irish Landlord and Tenant (Amendment) Act 1980. Both require that the landlord must be able to prove a fixed and genuine intention to redevelop at the date of the lease renewal hearing. The major distinction between Ireland and England is that English legislation only requires a reasonable prospect of planning permission, whereas in Ireland a valid planning permission is required.

The facts

In this case, prior to the hearing the landlord put forward a number of schemes of development. The final scheme related to the conversion of the premises to two retail units, which did not require planning permission, and was designed to meet the vacant possession requirement under Ground F. The landlord admitted it would not carry out this scheme if the tenant left voluntarily, but would carry them out in full if the court ordered vacant possession. The tenant argued that given the landlord’s intention to carry out this scheme was conditional on these works being necessary in order to satisfy Ground F, this was not a sufficient intention to satisfy Ground F.

The decision

The court determined that the landlord had the requisite intent to carry out the scheme and this intention satisfied Ground F. In coming to this conclusion, the court placed emphasis on the fact that the landlord gave an undertaking to carry out the works. The court stated that although market forces will usually generate commercially viable projects, legislative policy did not require it to do so. Ground F requires an examination of what the landlord intends to do and whether it intends to do it rather than why.

The Irish courts have similarly confirmed that the landlord’s intention must exist at the time of the court’s decision, and this intention must be grounded by a valid planning permission.

Conclusion

Landlords should be aware that while is it open to them to devise schemes of development founded on valid planning permissions in order to obtain vacant possession, courts will be sceptical as to the genuine nature of an intention to actually complete the works. In England, a legally enforceable undertaking to carry out the works may be required to ensure that the landlord does not ‘change its mind’ after vacant possession is obtained. In Ireland, where the landlord does not carry out the redevelopment within a reasonable time, the court may order the landlord to pay punitive damages to the tenant.

For more information relating to lease renewals and related matters, please contact a member of our Real Estate team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.